How I’m dealing with an account in collections on my credit report

As you may have read on this blog earlier this month, February brought with it a very nasty surprise: When I logged into my Credit Karma account, an alert popped up saying one of my accounts had gone into collections and it wasn’t one I recognized.

Not only that, my score had dropped by about 25 points.

My initial reaction was more to freak out than to snap into action, but eventually, snap I did. Here are the steps I’ve taken or am taking to get this taken care of.

Step 0: Sign up for Credit Karma

I can only imagine how long this flaw would have remained unattended to on my credit report had I not been signed up with Credit Karma.

At best, I would have caught it when I pulled my free annual credit reports.

But what if I wasn’t the one to catch it? I might have first found out about the problem from a credit card I was applying to, a mortgage I was refinancing, or even a job I was applying to.

Scary!

Credit Karma. It’s free and updates once a week. Maybe you should sign up.

Step 1: Pull credit reports using annualCreditReport.com

Because Credit Karma generates its score from data from TransUnion — one of the three national credit reporting agencies — I wanted to pull my credit report from them to get more detail about the account in collections.

I also wanted to pull my credit report from the other two credit bureaus — Equifax and Experian — to see if these had the same problem.

To do this, I took advantage of a provision in the Fair Credit Reporting Act that allows me to receive one free credit report every year from each of the three credit reporting bureaus through AnnualCreditReport.com.

Site’s pretty self-explanatory:

Click to enlarge

One quick note. There are many websites and companies out there that use commercials and other media to try and trick you into thinking they’re the official way to get these free reports. For more info on these imposters, see this FTC page.

After I pulled all three I found that, luckily, the collections account was only on my TransUnion credit report.

From what I could tell, it looked like the amount in question was under $100, was a few years old, and had been sold to a collections agency.

Step 2: I called the collections agency

Importantly, if you do this, just assume you’re being recorded. In other words, if you plan on disputing this, don’t say anything that implies that you’re admitting any sort of guilt.

When I called, I simply asked for three things:

More details about the account in question (To help me start building a case against it)

The options available to me

A letter validating the debt in question

They were relatively pleasant, though they did ask if I’d like to settle the debt by giving them my bank account information. I politely declined.

Step 3: I’ll write TransUnion a letter asking them to remove the error

Once I have the validation letter in hand, I’ll look over the details to verify that it is indeed an error, and use the FTC’s sample letter to write TransUnion asking that it be removed, including photo-copies of the collections account on my credit report, and any other documents I have that support my claim.

And if it turns out that it’s not an error?

Then I’m probably out of luck for seven years.

Even the FTC is pretty clear about this part, in stating: “No one can legally remove accurate and timely negative information from a credit report.”

Thank goodness for credit karma and thanks for the reminder I didn’t pull my own credit reports last year and need to do so this year. Sounds like it’s a false charge you should be able to clear easily (but what a pain in the butt).KK @ Student Debt Survivor recently posted…The Best $200 I Ever Spent

“They were relatively pleasant, though they did ask if I’d like to settle the debt by giving them my bank account information. I politely declined.” Wow! I’ve dealt with two different agencies and never had this happen.

How are you out of luck for 7 years? If they don’t remove it as an error will you just not pay it? Because once you pay it, it will be taken off of your credit report. (Although you haven’t mentioned the amount so I’m guessing it’s quite a bit.) I’ve had to file a claim to get an old account removed but for the collections, if it’s under $100 I’d rather pay it than spend all this effort refuting it.Leslie Beslie recently posted…Netflix Instant Picks: Say Anything, Heartbreakers, Leap of Faith

I love Credit Karma! It’s nice to be able to see what’s up at any given time, but I take the credit score with a grain of salt. Hope you get everything figured out soon!Erin @ My Alternate Life recently posted…What Can an Average Income Buy?

Oh, of course. The nominal score doesn’t tell me much… I do pay attention to the big changes in score though and — especially after this incident — the alertsDebt Blag recently posted…Is frugality sexy?

Love this post. Most people don’t check their credit report until they are about to purchase something large like a car or home. Credit is a big part of our lives, it’s weird that people are so passive about checking their credit report. I hope this works out for you.